May 2016 H OUSING N EWS R EPORT
Detroit Resurrected: From Bankruptcy to Back BOOK REVIEW
By Octavio Nuiry, Managing Editor
the bitter bankruptcy filing, the so-called “Grand Bargain” that saved the city’s cultural crown jewels at the Detroit Institute of Arts from the auction block, and finally to the city emerging from court protection in late 2014. “At city hall, a cascading series of ineffective politicians — who lacked the will, foresight, or ability to make dramatic changes — turned to Wall Street to foot the bill for their fiscal recklessness, choosing debt over the hard choices necessary to protect the people of Detroit and ensure the financial security of the city’s retirees,” writes Bomey in the introduction. What makes the book interesting are the fascinating characters involved in the bankruptcy saga, including a team of elected officials, appointed emergency supervisors, high-powered bankruptcy lawyers and philanthropic activists challenging union bosses, and Wall Street financiers to save the city by reorganizing its crushing debt. Consider, for example, former Detroit Mayor Kwame Kilpatrick, who went to prison on racketeering charges following the end of his term in 2008. Several years before his conviction on federal corruption charges, Mayor Kilpatrick engineered a scheme to borrow $1.4 billion to fund pensions in 2004 — even though the city could borrow only $600 million. With the city unable to issue traditional bonds, Kilpatrick and his conspirators, circumvented borrowing limits by dreaming up a disastrous conspiracy to create two shell companies — Financial Guaranty Insurance Company and Syncora Holdings — aimed at showering cash into the cities billion-dollar pension funds: the Police and Fire Retirement System and the General Retirement System.
In 2013, Detroit was on its knees. After nearly a half-century of fiscal and political mismanagement, the former Motor City was out of gas. The financial implosion — and ultimately the city’s bankruptcy — pitted pensioners, bondholders and city residents against one another in the largest and ugliest municipal bankruptcy in American history.
How Detroit collapsed — and was ‘resurrected’ — is the story that Nathan Bomey, aUSA Today business reporter, brings to light in his gripping new book “Detroit Resurrected: To Bankruptcy and Back” (W.W. Norton, 2016). Bomey, a former Detroit Free Press reporter, recounts Detroit’s 2013 Chapter 9 filing after five decades of plummeting population, dwindling tax revenue, rising foreclosures and the criminal mismanagement of the city’s public finances. Bomey, who was the lead reporter on a team of writers for the Detroit Free Press during the city’s bankruptcy trial in 2013, begins his fascinating story in bankruptcy court, where the city’s crushing $18 billion debt cast Wall Street creditors against retired pensioners and Detroit appointed emergency manager, Kevyn Orr, in July 2013. To pull Detroit out of its financial death spiral, Michigan Gov. Rick Snyder, a Republican, appointed Orr, a progressive Democrat bankruptcy attorney, to take over the city government and render Mayor David Bing and the City Council powerless.
The ‘Grand Bargain’
One of the pivotal moments in the book revolves around the “Grand Bargain,” where the potential liquidation of the artwork of the Detroit Institute of Arts was avoided
From there, Bomey takes readers on a journey through
Continued Next Page
16
Made with FlippingBook Online newsletter